[Federal Register Volume 60, Number 158 (Wednesday, August 16, 1995)]
[Notices]
[Pages 42532-42535]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-20213]



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DEPARTMENT OF COMMERCE
[C-549-802]


Ball Bearings and Parts Thereof From Thailand; Preliminary 
Results of a Countervailing Duty Administrative Review

AGENCY: Import Administration, International Trade Administration, 
Department of Commerce.

ACTION: Notice of preliminary results of countervailing duty 
administrative review.

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SUMMARY: The Department of Commerce (the Department) is conducting an 
administrative review of the countervailing duty order on ball bearings 
and parts thereof from Thailand. We preliminarily determine the total 
bounty or grant to be 1.33 percent ad valorem for all companies for the 
period January 1, 1993, through December 31, 1993. If the final results 
remain the same as these preliminary results of administrative review, 
we will instruct the U.S. Customs Service to assess countervailing 
duties as indicated above. We invite interested parties to comment on 
these preliminary results.

EFFECTIVE DATE: August 16, 1995.

FOR FURTHER INFORMATION CONTACT: Dana Mermelstein or Kelly Parkhill, 
Office of Countervailing Compliance, Import Administration, 
International Trade Administration, U.S. Department of Commerce, 14th 
Street and Constitution Avenue NW., Washington, D.C. 20230, telephone: 
(202) 482-2786.

SUPPLEMENTARY INFORMATION:

Background

    On May 3, 1989, the Department published in the Federal Register 
(54 FR 19130) the countervailing duty order on ball bearings and parts 
thereof from Thailand. On May 4, 1994, the Department published in the 
Federal Register a notice of ``Opportunity to Request Administrative 
Review'' (59 FR 23051) of this countervailing duty order. On May 31, 
1994, Torrington Company, the petitioner, requested an administrative 
review of the order. On May 31, 1994, Pelmec Thai Ltd. (Pelmec), NMB 
Thai Ltd. (NMB Thai), and NMB Hi-Tech Bearings Ltd. (NMB Hi-Tech), the 
respondent companies in prior reviews, also requested an administrative 
review.
    On June 15, 1994 (59 FR 30770), we initiated the review, covering 
the period January 1, 1993, through December 31, 1993. The review 
covers nine programs and three related producers/exporters, NMB Thai, 
Pelmec, and NMB Hi-Tech, which are wholly owned by Minebea Co., Ltd., 
of Japan.

Applicable Statute and Regulations

    The Department is conducting this administrative review in 
accordance with section 751(a) of the Tariff Act of 1930, as amended 
(the Act). Unless otherwise indicated, all citations to the statute and 
to the Department's regulations are in reference to the provisions as 
they existed on December 31, 1994.
Scope of Review

    Imports covered by this review are ball bearings and parts thereof. 
Such merchandise is described in detail in Appendix A to this notice. 
The Harmonized Tariff Schedule (HTS) item numbers listed in Appendix A 
are provided for convenience and Customs purposes. The written 
description remains dispositive.

Calculation Methodology

    In the first administrative review, respondents claimed that the 
F.O.B. value of the subject merchandise entering the United States is 
greater than the F.O.B. price charged by the companies in Thailand (57 
FR 26646; June 15, 1992). They explained that this discrepancy is due 
to a mark-up charged by the parent company, located in a third country, 
through which the merchandise is invoiced. However, the subject 
merchandise is shipped directly from Thailand to the United States and 
is not transshipped, combined with other merchandise, or repackaged 
with other merchandise. In other words, for each shipment of subject 
merchandise, there are two invoices and two corresponding F.O.B. export 
prices: 1) the F.O.B. export price at which the subject merchandise 
leaves Thailand, and on which subsidies from the Royal Thai Government 
(RTG) are earned by the companies, and upon which the subsidy rate is 
calculated; and 2) the F.O.B. export price which includes the parent 
company mark-up, and which is listed on the invoice accompanying the 
subject merchandise as it enters the United States, and upon which the 
cash deposits are collected and the countervailing duty is assessed. In 
prior reviews, we verified on a transaction-specific basis the direct 
correlation between the invoice which reflects the F.O.B. price on 
which the subsidies are earned and the invoice which reflects the 
marked-up price that accompanies each shipment as it enters the United 
States.
    Respondents argued that the calculated ad valorem rate should be 
adjusted by the ratio of the export value from Thailand to the export 
value charged by the parent company to the 

[[Page 42533]]
U.S. customer so that the amount of countervailing duties collected 
would reflect the amount of subsidies bestowed. The Department agreed 
and made this adjustment in prior administrative reviews (57 FR 26646, 
June 15, 1992; and 58 FR 36392, July 7, 1993). Since the mark-up is not 
part of the export value upon which the respondents earn bounties or 
grants, the Department has followed the methodology adopted in prior 
administrative reviews, and calculated the ad valorem rate as a 
percentage of the original export value from Thailand and then 
multiplied this rate by the adjustment ratio--the original export value 
from Thailand divided by the marked-up value of the goods entering the 
United States.
    We did not calculate a separate rate for each company because NMB 
Thai, Pelmec, and NMB Hi-Tech are wholly owned by one parent company, 
and are therefore related. See Final Affirmative Countervailing Duty 
Determination: Grain-Oreiented Electrical Steel (GOES) from Italy (59 
FR 18357, 18366, April 18, 1994). As a result of this relationship, we 
considered the three companies as one corporate entity in our 
calculations. We calculated the bounty or grant by first totalling the 
benefits received by the three companies for each program used. 
Dividing these sums by the total Thai export value for the three 
companies, we calculated the unadjusted bounty or grant for each 
program used. As described above, we adjusted these rates by 
multiplying them by the ratio of the original export price from 
Thailand to the marked-up price of the goods entering the United 
States. Finally, we summed the adjusted bounty or grant for each 
program, to arrive at the total country-wide bounty or grant.

Analysis of Programs

1. Investment Promotion Act of 1977 - Sections 31, 28 and 36(1)

    The Investment Promotion Act of 1977 (IPA) is administered by the 
Board of Investment (BOI) and is designed to provide incentives to 
invest in Thailand. In order to receive IPA benefits, each company must 
apply to the BOI for a Certificate of Promotion (license), which 
specifies goods to be produced, production and export requirements, and 
benefits approved. These licenses are granted at the discretion of the 
BOI and are periodically amended or reissued to change benefits or 
requirements. Each IPA benefit for which a company is eligible must be 
stated specifically in the license.
    The BOI licenses for Pelmec, NMB Thai and NMB Hi-Tech all 
originally included export requirements. In the Final Affirmative 
Countervailing Duty Determination and Countervailing Duty Order: Ball 
Bearings and Parts Thereof from Thailand (54 FR 19130; May 3, 1989), we 
determined that because the receipt of benefits under the IPA licenses 
was contingent upon export performance, these benefits were 
countervailable. However, effective January 1, 1990, producers of 
electronic parts (BOI Category 4.6) became eligible to apply to have 
export requirements eliminated from their BOI licenses. Most of the 
subject merchandise is classified by BOI under Category 4.6, and 
consequently, NMB Thai, NMB Hi-Tech, and Pelmec all applied for 
eliminations of their export requirements. NMB Thai's export 
requirements were lifted effective October 16, 1992, for one license, 
and effective November 9, 1992, for its three remaining licenses. The 
export requirements for NMB Hi-Tech's two licenses were lifted 
effective February 26, 1990, and November 19, 1990. Export requirements 
were eliminated from two of Pelmec's three licenses, effective November 
9, 1992. However, because the BOI considers some of the subject 
merchandise produced by Pelmec under one of its BOI licenses to be 
``ball bearings and parts for general industry,'' the export 
requirement has not been eliminated completely from its remaining 
license. Since export requirements remain in place for certain ball 
bearings subject to the countervailing duty order and the subject 
merchandise constitutes one class or kind of merchandise, we 
preliminarily determine that IPA benefits continued to be tied to 
export performance for manufacturers of subject merchandise during the 
review period.
    Effective April 1, 1993, the BOI issued new policies and criteria 
for investment promotion in BOI Announcement Number 1/1993. Under BOI 
Announcement Number 1/1993, tax and duty privileges for promoted 
projects approved after April 1, 1993, are contingent upon location of 
the promoted company in one of three types of investment promotion 
zones. Through BOI Announcement Number 2/1993, which also became 
effective on April 1, 1993, the BOI revised its list of activities 
eligible for investment promotion. In this revised list, all types of 
ball bearings and parts thereof were reclassified under industrial 
category 4.8, ``Manufacture of fabricated metal products, including 
metal parts for automotive and electronic products.'' The BOI 
Announcement Number 2/1993 specifies that promoted projects approved 
after April 1, 1993, and classified under category 4.8 must be located 
in industrial promotion zones 2 or 3. Furthermore, export performance 
continues to be a requirement for certain IPA benefits in zones 2 or 3.
    We preliminarily determine that IPA benefits are countervailable 
because during the review period IPA benefits continued to be tied to 
export performance for manufacturers of subject merchandise.
    NMB Thai and NMB Hi-Tech received benefits under three sections of 
the IPA during the review period: IPA Sections 31, 28, and 36(1). 
Pelmec received benefits under IPA Sections 28 and 36(1).
    Section 31: IPA Section 31 allows companies an exemption from 
payment of corporate income tax on profits derived from promoted 
exports. NMB Thai and NMB Hi-Tech claimed an income tax exemption under 
Section 31 on the income tax return filed during the review period.
    Section 28: Prior to 1992, IPA Section 28 allowed companies to 
import fixed assets free of import duties, the business tax, and the 
local tax. However, effective January 1, 1992, the RTG eliminated both 
the business and the local tax and instituted a value added tax (VAT) 
system.
    According to Section 21(4) of the VAT Act, if Section 28 benefits 
were granted by the BOI to a company before January 1, 1992, that 
company, when importing fixed assets under Section 28, would continue 
to be subject to the business tax provisions under Chapter IV, Title 
II, of the Revenue Code before being amended by the VAT Act. In 
accordance with Section 21(4), the company would be required to pay the 
business and local taxes only if its BOI license requirements were 
violated. Section 21(4) of the VAT Act applies to Pelmec, NMB Thai, and 
NMB Hi-Tech because all of their licenses were granted before January 
1, 1992, and contain Section 28 benefits. The respondents argued in 
their questionnaire response that given the provisions of the VAT Act 
and, specifically, Section 21(4), their exemption from the business and 
local taxes no longer constitutes a benefit to the companies because 1) 
no other companies are required to pay the business and local taxes, 
and 2) under Section 21(4), payment of the business and local taxes 
serves only as a penalty for noncompliance with BOI license 
requirements. We verified that under the new VAT law, companies are no 
longer required to pay business and local taxes with the exception of 
the 

[[Page 42534]]
noncompliance penalty noted above. For these reasons, we preliminarily 
determine that the business and local tax exemptions under Section 28 
no longer constitute a countervailable benefit for companies subject to 
Section 21(4) of the VAT Act.
    However, under provisions of Section 21(4) of the VAT Act, 
companies that were granted Section 28 benefits under the IPA before 
January 1, 1992, are not required to pay VAT on imports of fixed 
assets. In the 1992 and 1993 administrative reviews, the respondents 
argued that this exemption from VAT on imports of fixed assets did not 
constitute a benefit to the companies because all companies are 
effectively exempted from VAT on their imports of fixed assets. 
According to Section 82 of the VAT Act, the VAT liability is computed 
by subtracting the ``input tax'' (the VAT paid) from the ``output tax'' 
(the VAT collected). Consequently, companies that pay VAT on imports of 
fixed assets are effectively exempted from this VAT payment as they 
receive a credit for the VAT they paid on purchases of all inputs, 
including imports of fixed assets, when their monthly VAT liability is 
computed. In the 1992 administrative review, we examined this issue at 
verification. We confirmed that under the VAT system, companies receive 
credit for the VAT paid on the purchases of inputs and, as a result, no 
VAT is effectively paid by companies on these purchases. Since VAT 
liability is computed on a monthly basis, any possible time-value-of-
money benefit under Section 21(4) of the VAT Act in this review would 
be insignificant. On this basis, we preliminarily determine that the 
exemption of the VAT on imports of fixed assets under Section 21(4) of 
the VAT Act does not constitute a countervailable benefit to the 
companies specified in Section 21(4). In future administrative reviews, 
however, the Department will continue to examine provisions of the VAT 
Act, including Section 21(4), to ascertain that no countervailable 
benefits are being provided to manufacturers of subject merchandise.
    Since the business and local tax exemptions under Section 28 of the 
IPA and the VAT exemption under Section 21(4) of the VAT Act do not 
confer countervailable benefits to companies subject to Section 21(4) 
of the VAT Act, we preliminarily determine that only the exemptions of 
import duties on fixed assets under Section 28 of the IPA continue to 
provide countervailable benefits to the respondent companies which were 
all subject to Section 21(4) of the VAT Act during the review period.
    Section 36(1): IPA Section 36(1) allows companies to import 
essential materials (non-fixed assets that are not physically 
incorporated into the exported good) free of import duties. Pelmec, NMB 
Thai, and NMB Hi-Tech all claimed such exemptions during the review 
period.
    To calculate the benefit from Sections 31, 28, and 36(1) of the 
IPA, we followed the same methodology that has been used in prior 
administrative reviews (see, e.g., 58 FR 16174, March 25, 1993; 57 FR 
9413, March 18, 1992). For Section 31, we calculated the benefit by 
calculating the difference between what each company paid in corporate 
income tax during the review period and what it would have paid absent 
the exemption. We did this by multiplying the corporate income tax rate 
in effect during the review period by the amount of each company's 
income that was exempted from income tax. For Sections 28 and 36(1), we 
calculated the benefit by obtaining the amount of import duties that 
would have been paid on the imports absent the exemption. We then added 
all duty and tax savings under all the IPA programs and divided this 
aggregate benefit by the total export value of the subject merchandise 
(all companies in this review continued to receive IPA benefits 
contingent upon export performance under the pre-April 1, 1993, BOI 
regulations; therefore, we calculated the benefit using total exports 
rather than total sales). We then made the adjustment for the parent 
company mark-up discussed in the ``Calculation Methodology'' section 
above. On this basis, we preliminarily determine the bounty or grant 
from IPA Sections 31, 28 and 36(1) to be 1.33 percent ad valorem during 
the review period.

2. Electricity Discounts for Exporters

    Electricity discounts for exporters were terminated effective 
January 1, 1990. However, because government authorities can defer 
action on company applications for up to five years, residual benefits 
are possible up to five years after termination of the program. Because 
this program was contingent upon exports, we preliminarily determine 
that it constitutes an export subsidy.
    NMB Thai received such residual benefits during the review period. 
We calculated the benefit attributable to these residual benefits by 
dividing the amount of the electricity discount by the total F.O.B. 
export value of subject merchandise. We then made the adjustment for 
the parent company mark-up discussed in the ``Calculation Methodology'' 
section above. On this basis, we preliminarily determine the bounty or 
grant from residual electricity discounts to be less than 0.005 percent 
ad valorem during the review period.

3. Tax Certificates for Exporters
    The RTG issues tax certificates to exporters of record which are 
transferable and which rebate indirect taxes and import duties levied 
on inputs used to produce exports. This rebate program is provided for 
in the ``Tax and Duty Compensation of Exported Goods Produced in the 
Kingdom Act'' (Tax and Duty Act).
    The Thai Ministry of Finance computes the value of the rebate rates 
under the Tax and Duty Act based on the Basic Input-Output Table of 
Thailand (I-O table). Using this table, the Ministry computes the value 
of total inputs (both imported and domestic) at ex-factory prices, and 
the import duties and indirect taxes on each input. As determined in 
the Final Affirmative Countervailing Duty Determination and 
Countervailing Duty Order: Ball Bearings and Parts Thereof from 
Thailand (54 FR 19130; May 3, 1989), these rebates are countervailable 
only to the extent that the remissions of duties and taxes exceed those 
actually levied on physically incorporated inputs.
    Prior to 1992, there were two rates for tax certificates, the ``A'' 
rate, which rebated import duties and business taxes, and the ``B'' 
rate, which rebated only business taxes. Exporters of the subject 
merchandise were eligible for the ``B'' rate only. Because of their IPA 
benefits, they were ineligible to receive the ``A'' rate.
    Effective January 1, 1992, as a result of the adoption of the VAT, 
the ``B'' rate was terminated and the ``A'' rate was revised to rebate 
only import duties. Accordingly, none of the companies under review 
were eligible to apply for or earn rebates under this program during 
the review period. Based on prior Department practice, we countervailed 
the benefits under the Tax Certificates program at the time the tax 
certificates were earned. See, e.g., Final Affirmative Countervailing 
Duty Determination: Carbon Steel Butt-Weld Pipe Fittings from Thailand, 
55 FR 1695, 1699 (January 18, 1990). All tax certificates received 
during the 1993 review period were earned in prior years and were 
countervailed in prior review periods. As no tax certificates were 
earned during the review period, we preliminarily determine that 
producers of the subject merchandise received no bounty or grant from 
the tax 

[[Page 42535]]
certificate program during the review period.

4. Other Programs

    We also examined the following programs and preliminarily determine 
that the exporters of the subject merchandise did not apply for or 
receive benefits under these programs during the review period:
     Export Packing Credits
     Rediscount of Industrial Bills
     Export Processing Zones
     IPA Sections 33 and 36(4)
     Reduced Business Taxes for Producers of Intermediate Goods 
for Export Industries
     International Trade Promotion Fund

Preliminary Results of Review

    As a result of our review, we preliminarily determine the total 
bounty or grant to be 1.33 percent ad valorem for the period January 1, 
1993, through December 31, 1993.
    If the final results of this review remain the same as the 
preliminary results, the Department intends to instruct the Customs 
Service to assess countervailing duties of 1.33 percent of the F.O.B. 
invoice price on all shipments from Thailand of the subject merchandise 
exported on or after January 1, 1993, and on or before December 31, 
1993. The Department also intends to instruct the Customs Service to 
collect a cash deposit of estimated countervailing duties of 1.33 
merchandise entered, or withdrawn from warehouse, for consumption on or 
after the date of publication of the final results of this review.
    Interested parties may request disclosure of the calculation 
methodology and may request a hearing within 10 days of the date of 
publication of this notice. Case briefs or other written comments from 
interested parties may be submitted not later than 30 days after the 
date of publication of this notice. Rebuttal briefs and rebuttal 
comments, limited to issues raised in the case briefs, may be filed not 
later than 37 days after the date of publication of this notice. Any 
hearing, if requested, will be held seven days after the scheduled date 
for submission of rebuttal briefs. Copies of case briefs and rebuttal 
briefs must be served on interested parties in accordance with section 
355.38(e) of the Department's regulations.
    Representatives of parties to the proceeding may request disclosure 
of proprietary information under administrative protective order no 
later than 10 days after the representative's client or employer 
becomes a party to the proceeding, but in no event later than the date 
the case briefs, under 19 CFR 355.38(c), are due. The Department will 
publish the final results of this administrative review including the 
results of its analysis of issues raised in any case or rebuttal brief, 
or at a hearing.
    This administrative review and notice are in accordance with 
section 751(a)(1) of the Act (19 U.S.C. 1675(a)(1) and 19 CFR 355.22).

    Dated: August 8, 1995.
Susan G. Esserman,
Assistant Secretary, for Import Administration.
Appendix A

Scope of the Review

    The products covered by this review, ball bearings, mounted or 
unmounted, and parts thereof, are described below.

Ball Bearings, Mounted or Unmounted, and Parts Thereof

    These products include all antifriction bearings which employ balls 
as the rolling element. During the review period, imports of these 
products were classifiable under the following categories: antifriction 
balls; ball bearings with integral shafts; ball bearings (including 
radial ball bearings) and parts thereof; ball bearing type pillow 
blocks and parts thereof; ball bearing type flange, take-up, cartridge, 
and hanger units, and parts thereof; and other bearings (except tapered 
roller bearings) and parts thereof. Wheel hub units which employ balls 
as the rolling element are subject to the review. Finished but unground 
or semiground balls are not included in the scope of this review. 
Imports of these products are currently classifiable under the 
following HTS item numbers: 8482.10.10, 8482.10.50, 8482.80.00, 
8482.91.00, 8482.99.10, 8482.99.70, 8483.20.40, 8483.20.80, 8483.30.40, 
8483.30.80, 8483.90.20, 8483.90.30, 8483.90.70, 8708.50.50, 8708.60.50, 
8708.99.50.
    This review covers all of the subject bearings and parts thereof 
outlined above with certain limitations. With regard to finished parts 
(inner race, outer race, cage, rollers, balls, seals, shields, etc.), 
all such parts are included in the scope of this review. For unfinished 
parts (inner race, outer race, rollers, balls, etc.), such parts are 
included if (1) they have been heat treated, or (2) heat treatment is 
not required to be performed on the part. Thus, the only unfinished 
parts that are not covered by this review are those where the part will 
be subject to heat treatment after importation.

[FR Doc. 95-20213 Filed 8-15-95; 8:45 am]
BILLING CODE 3510-DS-P